VW Cuts Capital Spending by €1 Billion

Volkswagen AG is trimming its investment budget for 2016 to about €12 billion ($12.8 billion) from the original €13 billion.

The supervisory board approved the 8% cut to help VW prepare for the cost of repairing more than 11 million vehicles that were rigged to cheat emission tests, had been rated unrealistically fuel efficient, or both.

The company will “strictly prioritize” all spending and cancel or postpone anything that is not absolutely necessary, according to CEO Matthias Mueller. VW is suspending plans for a new design center in Wolfsburg and reviewing a project to update a paint shop in Mexico.

Mueller adds that the all-electric replacement for the company’s slow-selling Phaeton luxury sedan has been delayed for an unspecified time. He did not comment about earlier reports that the company will shut down the special factory in Dresden that assembles eight of the €76,000 current-generation cars per week.

Mueller says VW will increase its spending on alternative powertrain development by about €100 million in 2016 to avoid “the mistake of economizing on our future.” Such spending will include e-mobility and digitalization. Mueller adds that the €4.4 billion investment budget for VW joint ventures in China is not affected by today’s cutbacks.